Windows 8 opens door for Qualcomm, Intel battle

Qualcomm, whose chips are the brains behind smart phones, is set to compete head to head with Intel in the computer market next year. Thin, light computers such as this Asus ultrabook, which contains an Intel processor, is where the companies are likely to do battle

/ Asus

Qualcomm, whose chips are the brains behind smart phones, is set to compete head to head with Intel in the computer market next year. Thin, light computers such as this Asus ultrabook, which contains an Intel processor, is where the companies are likely to do battle

Qualcomm, whose chips are the brains behind smart phones, is set to compete head to head with Intel in the computer market next year. Thin, light computers such as this Asus ultrabook, which contains an Intel processor, is where the companies are likely to do battle (/ Asus)

Microsoft and Qualcomm have been working closely together in recent years on smartphones, so closely, in fact, that smartphones running Microsoft’s Windows Phone 7 operating system for now must use Qualcomm chips.

That partnership is in the throes of making the leap beyond smartphones. It’s heading into notebooks, laptops and other computers, potentially ballooning Qualcomm’s market.

Late next year, Microsoft is expected to release its new computer operating system called Windows 8, incorporating several features found in Windows Phone 7, such as touch screen capability. And for the first time, Microsoft’s operating system for computers will be able to run on devices with semiconductor chips that are commonly used in smartphones.

Until now, Microsoft’s Windows operating system for computers worked only with processors made by Intel and AMD.

The change sets the stage for Qualcomm and other smartphone chip makers such as Nvidia and Texas Instruments to begin elbowing their way into Intel’s territory.

“The two largest players in the industry, Intel and Qualcomm, are on a road map to compete head-to-head over the next several years,” said T. Michael Walkley, an analyst with investment firm Canaccord Genuity.

Smartphone processors such as Qualcomm’s Snapdragon are built on architecture licensed from United Kingdom-based ARM Holdings. They are known for low power use, thus allowing all-day battery life.

Intel and AMD processors, which are built using Intel’s x86 architecture, are known for delivering hefty computing power but also taking big gulps of electricity in the process.

Surging sales of tablet computers certainly played a role in Microsoft’s move to make Windows compatible with smartphone processors. The tablet market is expected to continue to boom, with a compound annual growth rate of 42 percent in shipments from 2011 through 2015, according to IHS iSuppli, an industry research firm.

The more mature notebook computer market is forecast to grow 10 percent annually over the same time period.

“In the tablet world, ARM owns it,” said Will Strauss, head of industry research firm Forward Concepts. “It’s an area Intel has failed at, and it’s one that is taking away from the laptop market. So it’s this multimillion-unit market that Microsoft simply can’t afford to ignore.”

There are plenty of skeptics that Qualcomm and other ARM chip makers can attack Intel’s underbelly in the computer market. They point out that older software programs, such as Microsoft Excel, may not work on a Windows 8 computer with an ARM processor. Hundreds of other software programs built for x86 architecture also may not function properly on ARM-based machines.

In addition, breaking into a new market from scratch is never easy. Intel and AMD won’t cede market share without a fight, analysts say.

Intel isn’t sitting still. Its road map calls for producing processors that at least come close to matching the low power consumption of ARM processors. Intel also recently bought Infineon, a maker of cellular modems, to bring connectivity to its processors in much the same way Qualcomm offers application processors that also include cellular links and other wireless connectivity features built in.

Moreover, Intel is promoting a new line of very thin, light laptops called ultrabooks that use its processors.

Though expensive today, ultrabooks are available from Acer, Asus and others. They have quicker boot up times and better battery life than typical laptops, according to Intel. They can run older Windows programs without problems. Intel has created a $300 million fund to spark the ultrabook market, which it sees as the next evolution for mobile computing.

“If I’m going to carry around a device and I want a no compromise device, it’s going to be something like this,” said Merlin Kister, a manager of consumer PC brand strategy for Intel, who was in San Diego recently demonstrating ultrabooks from Acer and Asus. “It changes the conversation.”

Ultrabooks are forecast to reach 43 percent of all notebook shipments by 2015, up from 2 percent today, said Matthew Wilkins, principal analyst with IHS.

Qualcomm sees a lot of potential for Snapdragon to move into computers on the heels of Windows 8. Much of the San Diego company’s increase in research and development spending this coming fiscal year is targeted toward readying Snapdragon for the PC market, according to Stacy Rasgon, an analyst with Bernstein Research.

Snapdragon already has been designed into 300 devices, mostly smartphones. An additional 350 Snapdragon gadgets are on the drawing boards. Qualcomm’s latest generation of Snapdragon, which is expected to show up in products in the first half of next year, will have five times the performance and 75 percent less power use than first-generation Snapdragon chips.

“What we’re doing is scaling up our operation to handle bigger displays and more computational power and so forth, but we’re keeping our DNA, which is the best performance for the same amount of power,” said Rob Chandhok, a Qualcomm senior vice president. “So the people who pick an ARM-based design and particularly a Snapdragon design are going to want a very thin, very light device that is always connected and will last them the entire work day” without having to charge the battery.

Chandhok added that Microsoft has already demonstrated a computer with Qualcomm’s Snapdragon chips running an early version of Windows 8.

“We’ve actually been working with Microsoft for quite some time,” he said. “The real point is it was Windows running on actual Qualcomm hardware, and that’s what is really exciting to us.”

Snapdragon and other ARM processors also are less expensive than Intel chips, say analysts, in part because there is more competition in the ARM-based chip market. In addition to Qualcomm, Nvidia and Texas Instruments, companies such as Apple, Samsung and Marvell also make ARM-based processors.

Walkley, the Canaccord Genuity analyst, said both Qualcomm and Intel have big research and development budgets and a path to produce integrated chips that are not only the brains of devices but also have wireless connectivity and other features. So both are likely to succeed to a degree in entering each other markets.

“But if you look at their competitors, they may not be as well positioned to compete long term versus where Qualcomm’s and Intel’s road maps are heading into 2013 and beyond,” he said.